Gravita India Limited — Q3 FY25 earnings call

Call held 23 Jan 2025

Management summary

Gravita India delivered a robust Q3 FY25 performance characterized by significant volume growth across all segments and a strategic shift toward domestic scrap sourcing driven by EPR and BWMR regulations. The successful ₹1,000 crore QIP has fortified the balance sheet, enabling a path to zero gross debt by fiscal year-end while funding aggressive capacity expansion toward 5 lakh MTPA by FY27. Management remains highly confident in achieving its Vision 2028 goals through diversification into lithium-ion and rubber recycling alongside core lead and aluminium growth.

Highlights

  • Consolidated revenue for Q3 FY25 reached ₹996 crores, up 31% YoY and 7% QoQ

  • Overall volume growth of 33% in Q3, led by a 92% surge in aluminium volumes to 6,264 tons

  • Consolidated PAT grew 29% YoY to ₹78 crores with a strong PAT margin of 7.8%

  • Domestic scrap sourcing experienced 50% YoY growth, now accounting for 44% of total scrap processed in India

  • Successfully raised ₹1,000 crores through QIP, with ₹245 crores already utilized for debt repayment and working capital

  • Management reiterated Vision 2028 targets: 25%+ volume CAGR and 35%+ profitability growth

  • Gross debt is targeted to reach zero by March 2025 following QIP proceeds utilization

  • Total recycling capacity expanded to 308,000 tons per annum, including new rubber recycling capabilities

Key financials

  1. Revenue ₹996 Cr +31%YoY
  2. EBITDA Margin 10.3%
  3. PAT ₹78 Cr +29%YoY
  4. EBITDA per kg (Lead) ₹18.5
  5. Total Volume 53,443 tons +33%YoY
  6. Net Debt ₹600 Cr

What they filed

Q1 FY27: revenue up 41.8%, net profit up 14.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue927 996 1,037 1,040 1,036 +12%1,017 +2%1,173 +13%1,475 +42%
EBITDA63 81 92 101 102 +62%120 +48%113 +23%110 +9%
Net profit72 78 95 93 96 +33%97 +24%92 −3%106 +14%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Volume
53,443 tons Total
  • Lead 43,900 tons 82.1%
  • Aluminium 6,264 tons 11.7%
  • Plastic 3,279 tons 6.1%

Guidance & targets

Capacity

  • Total Recycling Capacity Capacity · FY27 · High confidence 5,00,000
    Gravita is steadily advancing towards its goal of exceeding 5 lakh metric ton per annum capacity by FY '27.

    — Yogesh Malhotra, CEO

Volume

  • Volume CAGR Volume · next 3-4 years · High confidence 25%+
    Key targets include a volume CAGR of 25% plus, profitability growth of 35% plus.

    — Yogesh Malhotra, CEO

Debt

  • Gross Debt Debt · March 2025 · High confidence 0
    So it is going to be gross debt becoming zero by March end as we have taken this QIP money.

    — Yogesh Malhotra, CEO

Market Share

  • Non-lead business share Market Share · Vision 2028 · Medium confidence 30%+
    increasing the non-lead business share to 30% plus.

    — Yogesh Malhotra, CEO

Margin

  • Sustainable Aluminium EBITDA Margin · Sustainable · Medium confidence ₹14-15
    So on a sustainable basis, INR14 to INR15 is the margin that you can expect going forward [for aluminium].

    — Yogesh Malhotra, CEO

Risks & concerns

  • Geopolitical Unrest and Shipping Costs

    medium

    Management cited unrest in Mozambique and previous Red Sea issues as factors that can disrupt supply chains and inflate freight costs.

    Management acknowledged

  • LME Price Volatility in Aluminium

    medium

    Lack of a hedging mechanism on MCX for aluminium alloys leads to margin fluctuations; sustainable margins depend on future hedging implementation.

    Both acknowledged

  • Technology Disruption (Lead-Acid to Lithium)

    low

    Management is diversifying into lithium-ion and other verticals to mitigate the long-term risk of lead-acid batteries going out of favor.

    Analyst downplayed

Areas of evasion (1)

  • Specific names of M&A targets were withheld for confidentiality.

Q&A highlights

2 direct
Aluminium Margin Sustainability Direct
In certain quarters, you will see higher margins as this quarter... on a sustainable basis, INR14 to INR15 is the margin that you can expect going forward.

Clarifies that current high aluminium margins (INR 18-21) are due to LME price movements and lack of hedging, setting realistic long-term expectations.

Asked by Amit Lahoti

Domestic Scrap Availability and RCM Direct
We expect a 3x increase in the next 2 to 3 years from the current availability of battery scrap... shift from unorganized to organized will be enough for us to meet our targets.

Highlights the massive tailwind from GST/RCM regulations which will force scrap into the organized sector, benefiting large players like Gravita.

Asked by Anurag Mantry

Lithium-ion Recycling Timeline
Currently, we are not considering any revenues coming from lithium-ion better in the next three to four years... it's only a pilot project currently.

Manages investor expectations regarding the new vertical, indicating it is a long-term technology play rather than an immediate revenue driver.

Asked by Sumant Kumar

2 min read 5 chapters

Detailed narrative

Vision 2028 and Capacity Expansion

Gravita is aggressively scaling its operations to exceed 5 lakh metric tons per annum capacity by FY27, up from its current 3.08 lakh tons. The company is targeting a volume CAGR of 25%+ and profitability growth of 35%+, supported by a shift toward high-margin value-added products which currently contribute 46% of revenue. Management expects ROIC to remain above 25%, eventually reaching 27-28% as working capital cycles improve.

Regulatory Tailwinds in Domestic Scrap

Strict government regulations under BWMR and EPR have catalyzed a 50% YoY growth in domestic scrap availability for Gravita. Domestic sourcing now accounts for 44% of the scrap processed in India, providing a logistical advantage and reducing reliance on imports. The upcoming implementation of the Reverse Charge Mechanism (RCM) for battery scrap is expected to further shift the market from unorganized to organized players, potentially tripling battery scrap availability in the next 2-3 years.

QIP Utilization and Deleveraging Strategy

The company successfully raised ₹1,000 crores through a QIP, which is being strategically deployed to eliminate gross debt by March 2025. Of the proceeds, ₹245 crores have already been used for debt repayment and working capital. While the company will be debt-free in the short term, management indicated they may take on new debt in FY26 to fund strategic M&A opportunities and greenfield expansions in regions like Oman and the Dominican Republic.

Diversification into New Verticals

To mitigate the risk of technology disruption in lead-acid batteries, Gravita is diversifying into lithium-ion, rubber, and plastic recycling. A pilot project for lithium-ion recycling and a new rubber recycling plant in Mundra are expected to be operational in H1 FY26. The company aims to reduce lead's share of total revenue to approximately 70% within the next three years by scaling these new verticals.

Aluminium Segment Dynamics

Aluminium volumes surged 92% YoY in Q3 FY25 to 6,264 tons, though management cautioned that current margins of INR 18-21 per kg are inflated by LME price movements. A sustainable margin of INR 14-15 per kg is expected once a hedging mechanism is established on the MCX. The company expects the aluminium segment to grow at a 40% rate over the next 3-4 years as capacity utilization increases from the current 48%.

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